DCC support services group reports strong growth and plans for further acquisitions

Support services group DCC has said that it would like to spend around £150m (€211m) per year on acquisitions.

Management made the statement on an analyst call yesterday while presenting a strong set of interim results that comfortably beat market expectations.

The Dublin-based group, which is now listed in London and reports in sterling, generated operating profits of £88.4m (in the six months to the end of September, up by just over 26% on the same period last year).

Strong double-digit percentage growth was seen in the revenues of its energy, healthcare, and environmental divisions, with energy rising by nearly 66% to £52.9m (€74.7m) and driving group performance.

Only the technology division saw a dip in fortunes, with revenues there falling by 43.6%, year-on-year, to £8.6m. (€12.15m).

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On an overall group-wide basis, DCC’s first half revenues amounted to just under £5.1bn. (€7.2bn)

This represented an annualised drop of 6.6% and reflected the impact of lower oil prices.

Management, which also upped its interim dividend by 15% to just over 33p per share, said that, after the strong showing in the traditionally less significant first half, it expects full-year operating profit and earnings per share (for the 12 months to the end of March) to be “very significantly” ahead of the prior year and “modestly” ahead of current market consensus expectations.

The period was a strong one for acquisition activity, across the energy, healthcare, and technology divisions, and DCC added to that, yesterday, with further bolt-on buys in the latter two divisions.

“We now assume that DCC could report operating profit of £295m-£300m (€417m-€424) for 2016, 6% ahead of our previous assumption and 5% ahead of consensus,” said Darren McKinley of Merrion Capital, adding that the first half figures were 12% ahead of its expectations.

He added that with the group’s strong balance sheet and low net debt to earnings ratio, DCC “has the capacity to surprise, on the upside, by way of synergies and acquisitions”.

That was someting agreed with by David O’Brien at Goodbody Stockbrokers.

“Net debt currently sits at £170m, despite the record spend on acquisitions, which leaves the company with a strong and liquid balance sheet to take advantage of further M&A opportunities as they arise,” said Mr O’Brien.